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[July 02, 2011]
North Texas executives pocketed fatter bonuses in 2010 [The Dallas Morning News]
(Dallas Morning News (TX) Via Acquire Media NewsEdge) July 02--For executives at the largest companies in North Texas, 2010 was a bonus year.
Those executives saw their total median bonuses soar 32 percent, according to Longnecker & Associates, a Houston-based consulting firm that compiles annual executive compensation data for The Dallas Morning News.
The sharp rise in bonuses boosted the median total direct compensation of D-FW executives 13 percent to $1.06 million in 2010, compared with $935,527 in 2009.
Many executives saw their pay increase in 2010 because corporate profits boomed as the economy gradually recovered. In addition, a rising stock market increased the value of executives' stock awards.
"We're seeing somewhat of a turnaround from the recession," said Shane Krantz, senior consultant at Longnecker. "Companies have been recovering and have been becoming more profitable coming out of the recession. Levels of compensation are getting back to pre-recession." As a result, the gap between CEO pay and that of the average worker continues to widen.
In 1980, CEO pay nationwide equaled 42 times the average blue-collar worker's pay, the AFL-CIO said in its annual Executive Paywatch report.
"By 2010, CEO pay had grown to 343 times workers' median pay, by far the widest gap in the world," the group said.
"High pay disparities have a negative impact on employee morale and productivity," said Brandon Rees, deputy director of the AFL-CIO's Office of Investment. "Especially in difficult times, when workers are asked to get by with less, forgo pay raises, give up 401(k) pay matches, pay more for their health insurance, it's disconcerting to see that the pain is not being felt in the executive suite." The pay increase of the top execs in Dallas-Fort Worth actually trails their counterparts nationwide.
The median pay package for the head of a company in the Standard & Poor's 500 was $9 million in 2010, according to an analysis by The Associated Press using data provided by Equilar, an executive pay research firm.
That was 24 percent higher than a year earlier, reversing two years of declines. The AP study looked only at CEO compensation, while Longnecker's analysis for the first time looked at the 2010 pay of all executives, not just CEOs.
At the top The highest-paid D-FW executive in 2010 was Rex Tillerson, chairman and CEO of Irving-based Exxon Mobil Corp., whose total compensation was $28.9 million. That's a 6.25 percent increase from 2009, when his pay package totaled $27.2 million.
Total compensation includes base salary; bonus; nonstock incentives; long-term incentives, such as stock and stock options; and any change in pension value or change in the value of deferred compensation.
Tillerson also received the biggest stock award of any D-FW executive in 2010 -- $15.5 million.
Of course, Irving-based Exxon -- the largest publicly traded company in Dallas-Fort Worth based on annual revenue -- also had a good year. The oil giant reported total revenue of $341.6 billion in 2010, a 24 percent increase over 2009, and its profit rose 58 percent.
In addition to Tillerson, Exxon had one other executive among the 10 highest-paid execs: Donald D. Humphreys, senior vice president and treasurer, who ranked sixth with total compensation of $13.6 million. In all, five Exxon executives placed in the top 20.
One other D-FW company had two executives among the 10 highest-paid -- Six Flags Entertainment Corp., the 44th-largest publicly traded company in North Texas with 2010 revenue of $975.9 million.
Six Flags chairman, president and CEO James Reid-Anderson ranked third with total compensation of $16.8 million, and former president and CEO Mark Shapiro ranked fifth with a $13.6 million pay package. Six Flags announced in May 2010 that Shapiro was no longer president and CEO, and he left the company the next month.
The biggest bonus in 2010 went to Randall Stephenson, chairman, CEO and president of AT&T Inc., who pocketed $5.05 million.
Stephenson was also the second-highest-paid area executive, earning $27.3 million in 2010 -- 6.5 percent less than he was paid in 2009.
AT&T, the second-largest publicly traded company in D-FW, also placed five executives in the top 20.
Rising stock market Corporate executives in North Texas and nationwide benefited last year from a rising stock market that boosted the value of stock options received previously, said Greg Ruel, research associate at GovernanceMetrics International, an independent corporate governance research firm.
During the recession, many executives were granted stock options with low strike prices, Ruel said, "so now as the economy recovers and stock prices return to normalcy, they're seeing profits on these equity grants of a few years ago." North Texas companies have also been making up for lost time, said Josh Henke, managing director at Longnecker.
"In the two years that we've seen through the recession, companies -- at least in the Dallas market -- have been paying [executives] at market or a little under market of what everyone else is doing to the extreme," he said. "They've been paying under the market, so now this year, 2010, has been a catch-up year." Executive compensation experts also said that bonuses rose substantially in 2010 because companies better defined performance targets for their leaders.
"Boards relooked at and adjusted annual incentive plans and targets so they would be more realistic and achievable," Krantz said. "This does not mean that boards made targets easy. Targets were set with clear expectations on 'stretch' but were still attainable." David D'Alessandro, a Dallas lawyer who advises companies on compensation practices, agreed.
"I personally did not see any adjustments in the performance targets that made them easier to hit," said D'Alessandro, a partner at Vinson & Elkins LLP.
Corporate compensation committees, he said, "really stuck to what they've been doing in the past few years and were putting in mechanisms to incentivize the type of growth they were looking for." Say-on-pay votes A new wrinkle was introduced to the executive compensation process this year.
Thanks to a law passed by Congress, public companies now must give shareholders a vote at least once every three years on what they pay their executives. Called say-on-pay, the votes aren't binding, but they can draw attention to an executive's compensation.
As D'Alessandro said, the votes are "akin to: Do you like the way this company is compensating their executives?" So far this year, 22 North Texas companies have held say-on-pay votes, according to data compiled by Institutional Shareholder Services and Womble Carlyle, a Winston-Salem, N.C., law firm.
Each one had its pay plan approved by shareholders.
Among those holding votes was Exxon, which came under fire from ISS, an influential proxy advisory service.
ISS criticized Exxon's compensation practices and recommended that shareholders vote against its pay plan, arguing that Exxon has trailed its industry peers in shareholder returns.
At the same time, "total CEO compensation increased by 6.6 percent year-over-year," ISS said. "As such, a further analysis is warranted to determine whether pay and performance are sufficiently aligned." David Rosenthal, Exxon's vice president of investor relations, said the ISS argument is "fundamentally flawed" and its evaluation methods are shortsighted.
"The ISS recommendation is heavily influenced by a short-term orientation, which is total shareholder return on a one- and three-year basis," he said. "Exxon Mobil's business depends on investment lead times ranging from a minimum of five to 10 years to decades. Our compensation program is tied to the long-term nature of our business, as it should be." Rosenthal also said ISS uses a "faulty peer group" to measure Exxon Mobil's total shareholder return. "The ISS peer group includes companies a fraction of the size, complexity and scope of Exxon Mobil," he said.
Despite ISS' lack of support for Exxon's say-on-pay proposal, it passed with 67.2 percent of votes in favor.
Exxon wasn't the only North Texas company whose pay plan ISS opposed. It also recommended that shareholders turn down the packages proposed by J.C. Penney Co. and Dr Pepper Snapple Group Inc.
Nevertheless, shareholders approved both companies' compensation plans.
D'Alessandro said Exxon's vigorous defense of its compensation practices is an example of how companies are publicly fighting back against criticism by proxy advisory firms.
"In the past, companies would not do this," he said. "This is unprecedented, the activity we have this seen year." D'Alessandro said the message from companies to proxy advisory firms is, "We know our business better than you guys. Don't try and micromanage us." _________________________________________________________________________________________________________________________ HIGHEST-PAID EXECUTIVE Rex Tillerson Exxon Mobil Corp. chairman and CEO $28,952,558 Irving-based Exxon reported total revenue of $341.6 billion in 2010, a 24 percent increase over 2009, while the oil giant's profit rose 58 percent.
BIGGEST STOCK AWARD Rex Tillerson Exxon Mobil Corp. chairman and CEO $15,465,375 BIGGEST PERCENTAGE RAISE Donald J. Tomnitz D.R. Horton vice chairman, CEO and president $600,000 or 200% Fort Worth-based homebuilder D.R. Horton saw revenue grow by 20 percent in 2010 as it went from a loss of $549.8 million in 2009 to a $245.1 million profit last year.
BIGGEST BONUS Randall L. Stephenson AT&T Inc. chairman, CEO and president $5,050,000 _________________________________________________________________________________________________________________________ BIGGEST BONUSES IN 2010 Rank Executive Title Company Total annual incentive 1 Randall Stephenson Chairman, CEO and president AT&T $5,050,000 2 Trevor Fetter CEO and president Tenet Healthcare $4,581,616 3 Rex Tillerson Chairman and CEO Exxon Mobil $3,360,000 4 Daniel DeMatteo Executive chairman GameStop $3,229,000 5 Richard Templeton Chairman, president and CEO Texas Instruments $3,171,094 6 R. Richard Fontaine Chairman international GameStop $3,154,000 7 Richard Smith President and CEO Felcor Lodging Trust $3,066,667 8 M. Jay Allison President and CEO Comstock Resources $2,800,000 9 J. Paul Raines CEO GameStop $2,643,333 10 Myron "Mike" Ullman III Chairman and CEO J.C. Penney $2,562,656 NOTE: Total annual incentive is any cash payment including bonuses or nonequity awards for hitting performance targets.
SOURCE: Longnecker & Associates _________________________________________________________________________________________________________________________ LARGEST STOCK AND OPTION PACKAGES Rank Executive Company Title Total equity compensation 1 Rex Tillerson Exxon Mobil Chairman and CEO $15,465,375 2 James Reid-Anderson Six Flags CEO $15,330,957 3 Marshall McCrea III Energy Transfer Partners President and COO $13,455,000 4 Randall Stephenson AT&T Chairman, CEO and president $13,244,708 5 Myron "Mike" Ullman III J.C. Penney Chairman and CEO $7,999,989 6 Donald Humphreys Exxon Mobil Senior vice president and treasurer $7,904,525 7 Richard Templeton Texas Instruments Chairman, president and CEO $7,715,066 8 Alan Boeckmann Fluor Chairman and CEO $7,100,092 9 Thomas Manuel Aventine Renewable Energy CEO $6,292,800 10 Thomas Falk Kimberly-Clark Chairman and CEO $6,133,479 NOTE: Total equity compensation is the total stock award and option award values as reported in the company's proxy statement.
SOURCE: Longnecker & Associates _________________________________________________________________________________________________________________________ BIGGEST PAY RAISES IN 2010 Rank Executive Company Title Raise Change 1 Donald Tomnitz D.R. Horton Vice chairman, CEO and president $600,000 +200% 2 Donald Horton D.R. Horton Chairman $600,000 +150% 3 Lawrence Cohen Capital Senior Living Vice chairman, CEO and director $209,088 +48% 4 William Lindquist Valhi Senior vice president $480,200 +37% 5 Keith Johannessen Capital Senior Living President, chief operating officer and director $101,943 +37% 6 Ralph Beattie Capital Senior Living Executive vice president and chief financial officer $95,171 +37% 7 David Seaton Fluor Chief operating officer $182,696 +36% 8 M. Chad Crow Builders Firstsource Senior vice president and chief financial officer $88,077 +34% 9 Harold Hickey Exco Resources Vice president and chief operating officer $100,000 +29% 10 Irshad Ahmad Ennis Vice president, apparel division; and chief technology officer $71,158 +28% SOURCE: Longnecker & Associates ___ To see more of The Dallas Morning News, or to subscribe to the newspaper, go to
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